female board representation and corporate acquisition
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Female Board Representation and M&A 1
Female Board Representation and Corporate Acquisition Intensity
Guoli Chen
Assistant Professor of Strategy
INSEAD
1 Ayer Rajah Avenue
Singapore 138676
+65 6799 5354
guoli.chen@insead.edu
Craig Crossland
Assistant Professor of Management
University of Notre Dame
328 Mendoza College of Business
Notre Dame, IN 46637
+1 574 631 0291
craigcrossland@nd.edu
Sterling Huang
Assistant Professor of Accounting
Singapore Management University
70 Stamford Rd
Singapore 178901
+65 6808 7929
shuang@smu.edu.sg
Keywords: Board characteristics, director gender, mergers and acquisitions, corporate
governance, strategic leadership
Authors are listed in alphabetical order and contributed equally. We sincerely thank Phanish
Puranam, Christy Shropshire, and Bart Vanneste for their helpful comments on earlier drafts of
this manuscript, and Seunghwan Jeong for research assistance. We also thank Editor Margarethe
Wiersema and two anonymous reviewers for their feedback and guidance throughout the review
process. This study was funded in part by the INSEAD Alumni Fund.
Female Board Representation and M&A 2
ABSTRACT
This study examines the impact of female board representation on firm-level strategic behavior
within the domain of mergers and acquisitions (M&A). We build on social identity theory to
predict that greater female representation on a firm’s board will be negatively associated with both
the number of acquisitions the firm engages in and, conditional on doing a deal, acquisition size.
Using a comprehensive, multi-year sample of U.S. public firms, we find strong support for our
hypotheses. We demonstrate the robustness of our findings through the use of a difference-in-
differences analysis on a sub-sample of firms that experienced exogenous changes in board
gender composition as a result of director deaths.
Female representation on public corporate boards around the world has traditionally been low. For
example, only 17% of current U.S. Fortune 500 directors are women (Catalyst, 2014). Recently,
though, legislators and firms have come under increasing pressure to redress this imbalance. Since
2008, all Norwegian public firms have been required to have at least 40% of directorships filled
by women (Ahern and Dittmar, 2012). And, in 2012, the European Commission debated
legislation that would have required all EU public firms to achieve a minimum of 40% female
board representation by 2020 (Ibarra, 2012), or face heavy fines. Thus, understanding the impact
of board gender characteristics is a vitally important practical matter.
Public policy discussion of this issue has mostly focused on the eventual firm performance
implications, with supporters and opponents having contrasting views on whether mandatory
quotas would be beneficial for firms (e.g., Ibarra, 2012; Merchant, 2011). Academic research on
the topic is mixed, with studies showing both positive (e.g., Carter, Simkins, and Simpson, 2003)
and negative (e.g., Adams and Ferreira, 2009) overall impacts of female board representation.
However, although many of the contributors to this discussion have offered arguments
based on fundamental human capital differences (i.e., women in general will be more, less, or
equally capable as men in fulfilling director roles), few studies have carefully examined a more
proximal issue – how might a change in female board representation differentially affect a firm’s
strategic behavior? We address this issue in our paper. Building on social identity theory, we
Female Board Representation and M&A 3
theorize that higher levels of female board representation will affect intra-board social
psychological dynamics such that deliberations become more thorough and comprehensive,
resulting in more exhaustive evaluations and active oversight of proposed strategic actions. We
examine these ideas within the context of the acquisition intensity of S&P 1500 firms.
Our study provides several important contributions to strategic management. First, we
contribute to strategic leadership (Finkelstein, Hambrick, and Cannella, 2009) by providing a
theoretically-grounded explanation, based on social psychological processes, of why boards with
greater female representation will be associated with different firm-level strategic actions.
Methodologically, we also account for the impact of several alternative forms of intra-board
diversity, increasing the likelihood that our results are being uniquely driven by board gender
characteristics. Second, we contribute to mergers and acquisition research (Haleblian et al., 2009)
by providing insights into the influence of board characteristics (i.e., gender) on acquisition
behavior. Finally, our study offers a novel, econometrically-rigorous response to a fundamental
challenge that bedevils most attempts to assess the firm-level impact of board characteristics.
Specifically, it is often unclear to what extent board composition is itself endogenous to the
strategic behavior and performance outcomes of a firm (Ahern and Dittmar, 2012). We address
this challenge, and thereby demonstrate the robustness and validity of our original results, via a
difference-in-differences analysis of a sub-sample of firms experiencing exogenous board changes
as a result of director deaths.
THEORY AND HYPOTHESES
Women on corporate boards and board decision-making processes
Since the 1970s, a broad array of research has explored the issue of gender differences in
leadership and governance roles (e.g., Daily, Certo, and Dalton, 1999; Kanter, 1977; Nielsen and
Huse, 2010). Because the number of female CEOs in U.S. public firms continues to be extremely
Female Board Representation and M&A 4
low (Lee and James, 2007), many authors have focused on female representation on corporate
boards, which is both more common and more heterogeneous across firms (Daily et al., 1999). A
large amount of work in this area has examined the causes – such as status, social roles,
homosocial reproduction, and interpersonal networks – of the underrepresentation of women on
boards compared with their representation in management roles or the workforce generally (e.g.,
Hillman, Shropshire, and Cannella, 2007; Ibarra, 1993; Smith, 2002). In addition, a growing body
of work has begun to explore the different implications of female vs. male leadership, and how
gender-diverse boards might differ from all-male boards (e.g., Hillman, Cannella, and Harris,
2002; Sealy, Singh, and Vinnicombe, 2007; Singh, Terjesen, and Vinnicombe, 2008).
One area of ongoing debate in the literature is whether female and male directors differ
systematically in terms of underlying personality characteristics, preferences, and cognitions. For
instance, in the general population, meta-analytic reviews (Byrnes, Miller, and Schafer, 1999) and
cumulative evidence from economic experiments (Croson and Gneezy, 2009) suggest that men are
significantly more likely than women to engage in risk-taking behavior. However, extrapolating
this finding – or findings related to other possible gender differences in personality (Barber and
Odean, 2001) – to a senior leadership population is problematic for several reasons. First,
researchers have argued that the effect of gender on risk taking remains heavily contingent on the
nature of the task being examined and the context within which risk taking is evaluated (e.g., Holt
and Laury, 2002; Schubert et al., 1999). Second, and more importantly, although there is some
evidence that male and female leaders may be associated with different behavioral patterns (e.g.,
Huang and Kisgen, 2013), the small number of survey-based studies in this area provide little
support for the claim that female directors are significantly more risk-averse than male directors
(Adams and Funk, 2012; Graham, Harvey, and Puri, 2013).
Because of this lack of clarity, we instead consider the theoretical impact of female board
Female Board Representation and M&A 5
representation from the perspective of how it might impact board decision-making processes. To
do so, we draw on social identity theory (Tajfel and Turner, 1979), one of the most established and
widely-studied perspectives in the realm of social psychology. Social identity theory is an
umbrella term describing a series of socio-cognitive sub-theories that address how individuals’
interactions and behavior are influenced by the different categories to which they belong (Hogg,
2006; Hogg and Terry, 2000). Social identity theory addresses both the processes whereby
individuals are categorized into groups (by themselves and others), and how categorization and
identity influences interactions among individuals from different groups. Crucially, social identity
theory is underpinned by the notion that collective phenomena cannot adequately be explained by
recourse to individual differences or personality traits alone (Turner, 1996).
Individuals can self-categorize, and be categorized by others, along any number of
dimensions, but identification with a particular category is strongest when it is highly
psychologically salient, i.e., it reflects aspects of an individual that are central, valued, and
frequently employed (Ashforth and Mael, 1989; Yzerbyt and Demoulin, 2010). Highly salient
categories – such as gender – are represented cognitively as prototypes, which maximize
perceptions of intra-category similarities and inter-category differences (Hogg and Terry, 2000).
Categories thus have a depersonalizing influence. A superordinate group where multiple
categories are represented – such as a board of directors – can act as a ‘crucible in which inter-
subgroup differences are sharpened’ (Hogg, 2006: 123).
Research suggests that such inter-subgroup differences are sharpened in two distinct ways
(Yzerbyt and Demoulin, 2010). First, the process of categorization is associated with an
“interindividual-intergroup discontinuity effect” (Wildschut and Insko, 2007), whereby intergroup
responses are more hostile than interindividual responses. When members of one category (an
ingroup) see others as being representatives of another salient category (an outgroup), they are
Female Board Representation and M&A 6
more likely to see their interactions with these others as being with the depersonalized category
itself than with specific individuals. In turn, this can cause ingroup members to experience a
subconscious fear response – because their heightened levels of distrust lead them to expect zero-
sum competition from outgroup members – and a greed response – because they may think that
outgroup members are vulnerable (Wildschut et al., 2003). Additionally, individuals are more
likely to consciously frame intergroup contexts as being characterized by mixed motives, and
therefore prone to competitive behavior. Thus, people tend to be more competitive and less
cooperative in intergroup than in interindividual contexts.
Second, and relatedly, individuals respond differently to ingroup members than to outgroup
members, via ingroup favoritism and outgroup derogation (Hewstone, Rubin, and Willis, 2002).
Individuals tend to allocate more resources toward ingroup members, support the opinions of
ingroup members, and feel uncomfortable around, or simply avoid, outgroup members (Yzerbyt
and Demoulin, 2010). In response, outgroup members – especially when they represent
marginalized or minority categories (such as women on corporate boards) – tend to perceive such
biases as identity threats and be anxious to avoid confirming negative stereotypes (Branscombe,
Schmitt, and Harvey, 1999), thus making them more active in demonstrating their distinctiveness
and more competitive in interactions with the ingroup (Hogg, 2006).
We therefore argue that boards with one or more female directors will interact differently
than comparable all-male boards. Because the presence of multiple salient categories within a
board will be associated with more competitive interactions (Hogg, 2006), decision-making
processes are likely to be more contentious, thorough, and comprehensive, and less likely to be
characterized by acquiescence, rapid consensus, or groupthink (Hogg and Terry, 2000). In line
with this premise, prior work has linked group heterogeneity with the use of more diverse
information sources, the consideration of broader perspectives, and the willingness to challenge
Female Board Representation and M&A 7
taken-for-granted norms (e.g., Jackson, 1992; Wiersema and Bantel, 1992). Furthermore, female
and male directors are likely to have had different experiences (Huse, 2008) and thus differing
opinions on the most appropriate strategic options, enhancing the comprehensiveness of
discussions. Finally, there is evidence that male directors engage in their duties more diligently
and miss fewer meetings when there are also female directors on the same board (Adams and
Ferreira, 2009), which is likely to amplify the comprehensiveness of discussions even further.
These processes should intensify as the proportion of female directors increases. However,
the addition of even a single female director to an all-male board is likely to be impactful.
Membership of an underrepresented category does not preclude one from influencing group
decision-making processes (Westphal and Milton, 2000), and work on the topic of minority
influence suggests that merely being exposed to a differing (minority) viewpoint impacts majority
viewpoint-holders by making them more likely to engage in divergent thinking and expend
cognitive effort (e.g., Peterson and Nemeth, 1996).
In summary, we argue that increased female board representation will influence the social
psychological processes driving board decision making, thereby increasing decision-making
thoroughness and comprehensiveness. In turn, when considering major strategic proposals
suggested by management – especially in light of the relatively high levels of overconfidence
displayed by senior executives generally (Graham et al., 2013) – boards will be more exhaustive
in their evaluations, more active in exercising oversight, and more ready to block proposals that
seem overly speculative or unconsidered. We examine the manifestations of this process within
the domain of mergers and acquisitions.
Female board representation and corporate acquisition intensity
Mergers and acquisitions (M&A, or simply acquisitions) is a topic of great interest in managerial,
media, and academic circles (Haleblian et al., 2009). Although acquisitions can offer many
Female Board Representation and M&A 8
benefits to firms, such as enhanced economies of scale and scope, actual returns vary substantially
from deal to deal. In fact, research suggests that acquisitions are more likely to destroy than
enhance the value of the acquiring firm (Chatterjee, 1992; Haleblian et al., 2009; King et al.,
2004). Possible explanations for this finding are that acquisitions are undertaken without
sufficient due diligence (Puranam, Powell, and Singh, 2006), that managers are irrationally
overconfident concerning potential synergies (Hayward and Hambrick, 1997), and that acquiring
managers benefit disproportionately from acquisitions in the short-term – via status and
compensation – but that evaluating the success of an acquisition can be difficult until years
afterward (Haleblian et al., 2009). Thus, M&A provides a context where directors know that a
given action may be of great benefit to a firm, but the simultaneous knowledge that these types of
actions in general are both highly uncertain and likely to be harmful in the long-term.
Acquisitiveness. A firm’s acquisition intensity concerns the number of deals it engages in
and the typical size of each deal (Hitt et al., 1996). Building on our arguments above, we argue
that, compared to all-male boards, boards with one or more female directors will be associated
with more thorough intra-board discussions and more active oversight in evaluating executives’
recommendations. More comprehensive decision-making and oversight will increase the time
taken to reach a decision, especially a supportive decision. During the decision process, boards
will be cognizant of the complex nature of acquisitions (Haspeslagh and Jemison, 1991), the
uncertainty of acquisition payoffs (Haunschild, 1994), and the knowledge that most acquisitions
fail (Chatterjee, 1992), resulting in a greater likelihood of any given deal being shelved. These
outcomes are increasingly likely as the level of female board representation increases. In contrast,
boards with zero female directors will be much more likely to sign off on any given acquisition
and will do so more rapidly. The board as a whole is likely to engage in less debate, intra-board
opinions will be more homogeneous, discussions will be more streamlined, and executives’
Female Board Representation and M&A 9
recommendations will be scrutinized less rigorously. We therefore hypothesize:
H1: Greater female board representation will be associated with fewer acquisitions.
Acquisition size. Adopting a similar logic, we argue that, among those firms that do engage
in acquisitions, female board representation will be associated with smaller deals (i.e., the target
size will be a smaller percentage of the acquiring firm size). Larger deals have more material
consequences for a firm’s long-term health. In addition, evidence suggests that larger deals pose
qualitatively different integration challenges (Ellis et al., 2011), and that smaller acquisitions may
be more successful than larger ones (Moeller, Schlingemann, and Stulz, 2004). Finally, larger
deals may be viewed as signs of executive self-dealing or hubris (Hayward and Hambrick, 1997).
Therefore, more active boards are likely to be especially wary of large acquisitions, and a
comprehensive evaluation process is more likely to unearth compelling reasons to block such
proposals. In contrast, smaller deals are less likely to be quashed. Although all acquisitions have
uncertain outcomes, smaller deals are less likely to raise questions concerning strategic synergies,
integration challenges, or managerial motives. Thus, we hypothesize:
H2: Greater female board representation will be associated with smaller acquisitions.
METHODS
Sample and Data
To create our initial sample, we merged board and director information from the Investor
Responsibility Research Center (IRRC) database – which covers U.S. S&P 1500 firms from 1998
to 2010 – with financial data from Compustat and CRSP, resulting in a total of 14,220 firm-year
observations. We then used the Securities and Data Corporation (SDC) database to gather details
on all firms’ M&A deals over this sample frame – a total of 2,998 acquisitions undertaken by
Female Board Representation and M&A 10
1,542 firms.1 Because of a small amount of missing data for some control variables, our final
sample used to test H1 (number of acquisitions) comprised 13,248 observations, while our final
sample used to test H2 (size of acquisitions) comprised 2,825 observations.
Measures
Female board representation was operationalized as the number of female directors in a given
firm-year divided by total board size. In robustness tests, we dummy-coded this variable (with a
value of one if there was at least one female director on the board), generating similar results.
Acquisitiveness (H1) was operationalized as the number of acquisitions in a given firm-year; in
our sample, this ranged from 0 to 9. Acquisition size (H2) was operationalized as the total value of
all transactions in a given firm-year, scaled by the annual sales of the acquirer.
We included a comprehensive list of control variables. In tests of H1, we controlled for firm
size (logged total assets), firm performance (return on assets and Tobin’s Q), free cash flow, and
leverage ratio. We also controlled for governance conditions, including board independence
(outside director ratio), board size (number of directors), director ownership (a dummy variable
indicating at least one director held more than five percent of shares), busy board (a dummy
variable indicating that 50% or more of the board’s outside directors held three or more
directorships (Fich and Shivdasani, 2006)), and CEO duality (whether the CEO was also the
board-chair). In addition, we controlled for female CEO (a dummy variable indicating that the
CEO was female) and CEO ownership (the percentage of firm shares held by the CEO).
We controlled for interlocking firms’ activities, measured as the number of acquisitions
completed in Year t-1 by firms linked to the focal board via director interlocks. We also included a
dummy firm-year control for missing interlock data. Also, because our arguments are based on the
1 Following Masulis, Wang, and Xie (2007), we included those acquisitions: 1) that had been completed, 2) where the
acquirer controlled less than 50% of the target’s shares prior to the announcement and 100% of the target’s shares
after the transaction; and 3) where the deal value exceeded US$1m.
Female Board Representation and M&A 11
impact of differences in intra-board processes as a function of directors’ identities, we also
controlled for two other important forms of board diversity: age diversity and ethnicity diversity
(operationalized using the Blau Index, which is calculated as 1-∑ 𝑃𝑖2𝑆
𝑖=1 , where s is the number of
categories and p is the proportion of directors on a board that belongs to category i).2
Finally, we accounted for a board’s approach to acquisitions by controlling for the average
age of the board, the proportion of female directors that concurrently occupied executive positions
in other S&P firms (proportion of female executives), and the number of acquisitions in the
previous year. We also included year fixed effects and industry fixed effects in all models.
In our tests of H2, we added several binary controls capturing deal characteristics: tender
offer (the bid involved a tender offer to target shareholders), target termination fee (the takeover
agreement included a target termination fee), poison pill (a poison pill had affected the bidder's
acquisition attempt), competing bidder (there were one or more competing bidders), private
target, and public target.3 We also controlled for the mean acquisition size in the previous year.
Analysis
To test H1, we used Poisson regression models because the dependent variable was a count (our
results were robust to the use of negative binomial models). For H2, we used linear regression
models because the dependent variable was continuous. Because female directors are not
appointed to boards randomly (Hillman et al., 2007), we used a Heckman two-stage model to
correct for potential estimation biases. In the first stage, using the entire IRRC database, we ran a
probit regression model with robust standard errors to predict a binary indicator of whether there
was at least one female director in a given firm-year. We followed prior research (Hillman et al.,
2 Age group was measured in terms of birth cohorts, and specifically the ten-year periods from 1910, 1920, 1930,
1940, 1950, and 1960. Ethnicity was coded in terms of five categories: Asian, Black/African-American (incl. Other),
Caucasian, Hispanic/Latino, and Native American. 3 An acquisition target can be a public firm, private firm, or a subsidiary of an existing firm.
Female Board Representation and M&A 12
2007) to include the following lagged variables as the predictors: firm size, firm age, firm
performance (ROA), leverage ratio, stock return volatility (the standard deviation of daily stock
returns over the previous year), board size (number of directors) and female director in the
interlocking firms (a dummy variable indicating whether the board’s interlocking firms had any
female directors). Our exogenous instrument was female labor force participation rate, calculated
at the U.S. county level (data sourced from the U.S. Census Bureau), and based on the location of
a firm’s headquarters. This measure represents the participation of women generally in the firm’s
local labor market. It therefore should be related to our independent variable (female board
representation) because firms are more likely to hire local directors (Knyazeva, Knyazeva, and
Masulis, 2013), but is theoretically unrelated to acquisition intensity. Results from this model
(which we used to construct an Inverse Mills ratio) were largely as expected, with female labor
force participation rate and all predictors except firm performance and leverage being significant.
RESULTS
Table 1 reports descriptive statistics and bivariate correlations for all variables. In our sample,
mean female director representation was close to 10%, and there was at least one female director
associated with 63% of board-years. Model 2 in Table 2 reports our test of Hypothesis 1. Female
board representation was negatively significantly related to acquisitiveness (β = -0.897, p < 0.01),
supporting H1. Model 4 in Table 2 reports our test of Hypothesis 2. Again as predicted, female
board representation was negatively associated with acquisition size (β = -0.223, p < 0.05),
supporting H2. We also note that one of our control variables, ethnicity diversity, was consistently
a significant predictor of our two dependent variables across each of the four models in Table 2
(while age diversity was a significant predictor of acquisitiveness in Model 2). This is consistent
with our core theoretical premise that female board representation influences M&A activity via its
impact on intra-board processes. Finally, our results provide evidence of economic significance. A
Female Board Representation and M&A 13
change in female board representation from low (1 s.d. below the mean) to high (1 s.d. above the
mean) levels was associated with an 18% decrease in acquisitiveness, a 12% decrease in
acquisition size, and a reduction of US$97.2m in M&A spending in a given year.
------ Tables 1 and 2 about here ------
Supplementary Analysis: Difference-in-Differences
A firm’s decision to hire a particular director may be endogenous to the firm’s strategic behavior
and performance. We addressed this issue in part through the use of two-stage analytical models.
To further address this possibility, we conducted a difference-in-differences analysis (Donald and
Lang, 2007) on a sub-sample of firms, using director deaths as a natural experiment. We assumed
that the death of a director would exogenously change the composition of the board. Specifically,
we expected that the death of a male director would relatively increase the influence of female
directors on the same board. Thus, in the post-death period, these ‘treatment’ firms (death is
considered a treatment event) should engage in fewer, smaller acquisitions compared to the pre-
death period. In other words, we expected to see patterns consistent with our earlier results.
To compile the sub-sample of firms experiencing director deaths, we manually searched
Factiva, Edgar 8-K filings, and Google using keywords related to ‘director’ and ‘death’ over the
period 1998 to 2010. This search produced an initial sample of 321 possible death events for all
firms in the IRRC database. However, our highly restrictive inclusion criteria – (1) the firm had to
already be in our sample, along with full firm-level and board-level data, (2) there had to be at
least one female director on the board at the time of death; and (3) the firm had to have engaged in
at least one acquisition event within a four-year window both before and after the death of the
director – reduced our sample to only 24 director deaths, all of which were males.
To test our assumption that female director influence increased after the death of a male
director (and to ensure that firms did not simply replace a deceased male director with another
Female Board Representation and M&A 14
male director), we calculated the difference in female board representation between the pre-death
and post-death periods for the treatment firms. Pre-death, the mean proportion of female directors
was 10.5 percent, while that percentage rose to 12.3 percent post-death (p < 0.05).
Next, we created a matched sample of 24 firms (i.e., a control group) to account for the
possibility that changes in firm behavior from pre-death to post-death periods may have simply
been a temporal trend. For each treatment firm in the event year (the year that the director died),
we selected a matching firm that had: (1) similar size (80-120% of total assets), (2) similar
performance (ROA), and (3) had engaged in at least one acquisition within a four-year window
both pre- and post-event year. T-tests confirmed no significant differences between the treatment
group and the control group in terms of firm size (p = 0.221) and ROS (p = 0.993).
The first difference, post-death, captured the change in acquisition behavior from before to
after the death event year. The second difference, death group, captured the variation between
treatment group and control group. Thus, the interaction between post-death and death group
captured the difference of these two differences. This coefficient represents a rigorous test of
whether an increase in female director influence due to the death of a male director impacted a
firm’s acquisition intensity. Our firm-level analysis used a sample of 96 observations, as we
treated all pre-death observations as one period and all post-death observations as another period.
Results showed that increased female director influence had a negative and significant impact on
acquisitiveness (β = -0.790, p < 0.01). Our deal-level analysis used a sample of 295 observations
(in this analysis, we also controlled for several important deal characteristics: target termination
fee, poison pill, and public target. Results showed that increased female director influence had a
negative and marginally significant impact on acquisition size (β = -0.789, p < 0.1). Thus, we
found additional support for both H1 and H2 (full analyses available upon request).
Female Board Representation and M&A 15
DISCUSSION
The issue of female representation on public company boards has become an increasingly
contentious topic in the business and general media (Ibarra, 2012; Merchant, 2011). As evidenced
by the recent moves of some jurisdictions to implement mandatory board gender quotas (Ahern
and Dittmar, 2012), this issue is not simply one of mere scholarly curiosity, but also has
substantial practical implications for firms. Most of the contributors to this discussion have
focused on eventual firm performance implications, but have not really examined the more
proximal issue of firm-level strategic behavior. In this study, we built on social identity theory to
argue that greater female board representation will be associated with more comprehensive board-
level decision making, which will, in turn, be associated with more exhaustive evaluation of major
strategic proposals. In an analysis of acquisition intensity in a 13-year sample of U.S. public
firms, we found robust evidence that greater female board representation was negatively
associated with both overall firm acquisitiveness and target acquisition size.
Our results have several important implications for strategy research. First, our results
suggest a partial explanation for the unclear impact of board gender composition on firm
performance. Board-level comprehensiveness in decision-making and oversight is undoubtedly
vital in many situations, especially when managers’ proposals are underdeveloped or self-serving.
However, the social psychological processes ensuing from the existence of multi-category boards
may also result in outcomes such as reduced group cohesiveness and increased coordination costs,
which may be harmful in certain contexts (cf. Michel and Hambrick, 1992). This reinforces prior
work (e.g., Dalton et al., 1998) showing that the impact of board composition on firm
performance is necessarily a contingent one.
Second, an interesting extension of our results relates to the situation where the percentage
of female directors continues to increase over time. Although the typical Fortune 500 board
Female Board Representation and M&A 16
currently has only 1-2 women sitting on it, if our theory is correct, and the impact of female board
representation is largely a result of its impact on intra-board social psychological processes, a
continued rise in the proportion of female directors substantially beyond 50% of board seats may
in fact result in an incremental reduction in decision comprehensiveness and activeness of board
oversight. Although such boards continue to be rare in the current U.S. business environment, we
think this offers an interesting possibility for future consideration.
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Female Board Representation and M&A 19
Table 1: Descriptive statistics and correlations
Variable Mean Std 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
1: Acquisitiveness 0.20 0.58 --- -.02 .00 .11 .00 .04 -.07 -.02 -.06 .04 .07 .07 .06 -.06 .15 .29 .20 .17 .13 .08 -.04 -.06 -.11 -.01 -.04 .08 -.04 .01 -.01 .01 .08 2: Female board represent. 0.10 0.09 .00 --- .27 .23 -.02 .12 .07 .22 -.08 .15 -.15 .16 -.05 .05 .35 .06 .34 -.01 .10 -.01 .07 -.38 -.08 .01 .07 .02 .03 -.06 .06 -.04 .03 3: Board independence 0.70 0.16 .03 .25 --- .08 -.18 .12 .08 .04 -.19 .13 -.23 .11 -.15 .22 .07 .03 .19 -.09 .06 -.04 -.03 -.24 -.05 -.02 .04 .12 .01 -.02 .02 -.03 .02 4: Board size 9.27 2.41 .01 .29 .09 --- -.08 .13 .11 -.03 -.12 .08 .05 .06 .06 .21 .10 .09 .63 -.18 -.11 -.33 .18 -.73 -.05 .02 .18 .04 .04 -.26 .26 -.02 .03 5: Director ownership 0.13 0.33 -.03 -.06 -.20 .03 --- -.01 -.13 .13 .03 -.05 .02 .04 .07 -.06 .06 -.02 -.09 .05 .01 .05 .02 .07 .03 -.03 -.07 -.12 -.01 .06 -.06 .02 -.03 6: Busy board 0.08 0.28 .04 .10 .12 .17 -.06 --- .08 .01 -.04 .10 .05 .04 -.16 .14 .04 .00 .26 .08 .07 .04 .08 -.16 -.03 .07 .08 -.05 .06 -.08 .09 -.01 .02 7: CEO duality 0.61 0.49 -.02 .07 .08 .05 -.13 .10 --- -.02 .05 -.01 .08 -.06 -.10 .07 -.01 -.05 .15 -.08 -.07 -.09 .14 -.11 -.01 .00 .08 .00 .02 -.10 .09 .00 -.02 8: Female CEO 0.02 0.14 -.01 .20 .02 -.02 .02 .01 -.03 --- .00 .05 -.02 .04 .02 -.09 .10 -.01 .02 .06 .04 .02 -.05 -.01 .00 .01 .01 -.03 .01 -.01 .01 -.01 .02 9: CEO ownership 2.20 6.15 -.04 -.09 -.24 -.15 .07 -.07 .14 .00 --- -.09 .06 -.06 .07 -.05 -.05 -.05 -.15 .05 .00 .07 -.05 .16 .02 -.05 -.05 -.14 -.03 .06 -.06 .01 -.03 10: Interlock: acquisitiveness 0.43 0.81 .07 .16 .18 .19 -.04 .11 .02 .01 -.10 --- -.36 .13 -.04 .01 .06 .11 .24 .10 .10 .06 -.04 -.19 -.06 .09 .06 .00 .04 -.05 .05 .00 .13 11: Interlock: missing 0.34 0.48 -.06 -.16 -.32 -.07 .03 .01 .06 -.02 .10 -.39 --- -.18 .03 -.10 .01 -.17 -.11 .06 -.11 -.04 .09 .17 .05 .04 .03 .01 -.02 -.10 .10 -.01 -.13 12: Ethnic diversity 0.72 0.18 -.06 -.12 -.10 -.14 .00 -.05 .01 -.02 .07 -.15 .16 --- .00 -.02 .10 .13 .17 .00 .05 -.02 .01 -.18 -.08 .00 -.04 .06 .01 .04 -.04 -.01 .08 13: Age diversity 0.58 0.11 -.02 -.03 -.17 .09 .09 -.11 -.10 .02 .05 -.05 .04 .02 --- -.05 .03 .08 -.02 .02 .01 .04 -.01 -.04 .01 -.04 -.01 -.08 .00 .03 -.03 .00 -.01 14: Average age of board 60.03 4.02 -.02 .00 .18 .16 -.02 .06 .00 -.02 -.01 .07 -.20 -.03 -.03 --- -.15 .00 .21 -.22 -.01 -.11 .10 -.34 .02 .00 .08 .05 .01 -.08 .08 -.02 .01 15: Proportion of female exec 0.02 0.05 .02 .38 .10 .13 -.04 .07 .07 .11 -.06 .05 .03 -.06 .01 -.13 --- .14 .13 .09 .05 .03 .02 -.13 -.05 .00 -.02 .10 -.02 -.01 .00 -.02 .00 16: Number of deals last year 0.18 0.56 .32 .03 .04 .03 -.02 .04 -.02 -.01 -.05 .09 -.10 -.06 -.01 -.02 .03 --- .21 .02 .08 .02 -.02 -.14 -.06 .00 -.02 .03 .01 .01 -.01 .01 .04 17: Firm size 7.59 1.54 .12 .29 .17 .58 -.10 .28 .16 -.03 -.16 .28 -.17 -.16 -.05 .16 .12 .12 --- -.09 -.09 -.28 .22 -.67 -.07 .07 .24 -.06 .06 -.30 .31 .02 .03 18: Tobin’s Q 1.81 1.05 .08 -.03 -.07 -.12 .01 .01 -.03 .00 .05 .04 .02 .02 .00 -.11 .01 .04 -.13 --- .38 .52 -.29 .19 .06 .05 .00 -.04 .00 .03 -.03 .03 -.01 19: Free cash flow 0.04 0.08 .06 .09 .05 .03 .02 .03 -.02 .02 .00 .07 -.10 -.04 -.02 .03 .03 .04 -.01 .34 --- .52 -.27 -.01 -.10 .08 -.01 -.02 .01 .03 -.03 -.06 .03 20: ROA 0.04 0.13 .02 .04 .02 .04 .00 .00 .01 .00 .03 .02 -.05 .00 -.02 .07 .03 -.02 .05 .27 .50 --- -.25 .21 -.02 .08 -.06 -.04 .01 .10 -.10 -.01 .01 21: Leverage ratio 0.23 0.17 -.03 .08 .03 .22 -.01 .06 .09 -.03 -.11 .01 .06 -.03 .00 .00 .04 -.02 .31 -.33 -.21 -.15 --- -.19 .03 -.02 .02 .04 .03 -.03 .03 .02 -.01 22: Inverse Mills ratio 0.57 0.57 -.05 -.37 -.26 -.80 .01 -.19 -.06 .01 .18 -.29 .32 .22 -.03 -.28 -.14 -.07 -.65 .14 -.12 -.14 -.21 ---- .09 -.05 -.18 -.08 -.05 .21 -.20 .03 -.07 23: Deal size 0.24 0.65 --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- .01 .24 .00 .08 -.22 .22 .07 -.02 24: Tender offer 0.07 0.26 --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- .28 .00 .23 -.41 .42 .05 .00 25: Target termination fee 0.25 0.43 --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- -.02 .12 -.75 .76 .07 -.01 26: Poison pill 0.51 0.50 --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- .01 .00 .00 .02 .03 27: Competing bidder 0.02 0.13 --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- -.18 .18 .09 .00 28: Private target 0.69 0.46 --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- -.79 -.05 .02 29: Public target 0.30 0.46 --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- .05 -.02 30: Deal size last year 0.12 1.70 --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- .00 31: Interlock: deal size 0.09 0.43 --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Notes:
(1) N = 13,248 for Variables 1-22 (firm-year-level characteristics for tests of H1);
(2) N = 2,825 for Variables 23-31 (deal-level characteristics for tests of H2); (3) Below-diagonal correlations are based on a sample size of 13,248 (H1); |correlations| ≥ 0.03 are significant at the .01 level;
(4) Above-diagonal correlations are based on a sample size of 2,825 (H2); |correlations| ≥ 0.05 are significant at the .01 level;
Female Board Representation and M&A 20
Table 2: Impact of female board representation on acquisitiveness (H1) and acquisition size (H2)
VARIABLES
(H1) Acquisitiveness (H1) Acquisitiveness (H2) Acquisition size (H2) Acquisition size
Model (1) Model (2) Model (3) Model (4)
Constant -4.793*** -4.679*** -0.138 -0.118
(0.611) (0.393) (0.314) (0.315)
Board independence -0.021 0.043 -0.090 -0.075
(0.147) (0.138) (0.102) (0.099)
Board size -0.065*** -0.064*** -0.003 -0.003
(0.015) (0.015) (0.005) (0.005)
Director ownership -0.105 -0.107 0.063 0.062
(0.068) (0.132) (0.072) (0.071)
Busy board -0.066 -0.064 -0.001 -0.000
(0.066) (0.076) (0.035) (0.035)
CEO duality -0.025 -0.021 -0.016 -0.015
(0.043) (0.039) (0.028) (0.028)
Female CEO -0.265 -0.178 0.021 0.047**
(0.162) (0.215) (0.024) (0.020)
CEO ownership -0.014*** -0.014** 0.001 0.001
(0.005) (0.005) (0.004) (0.004)
Interlocking firms' activities 0.001 0.004 0.008 0.008
(0.023) (0.027) (0.013) (0.013)
Missing interlock 0.090 0.097 0.011 0.010
(0.073) (0.059) (0.040) (0.040)
Ethnicity diversity -0.208* -0.205*** -0.096* -0.094*
(0.115) (0.048) (0.050) (0.048)
Age diversity -0.241 -0.267* 0.096 0.089
(0.174) (0.162) (0.113) (0.111)
Average age of board -0.021*** -0.023*** 0.007 0.006
(0.006) (0.005) (0.004) (0.004)
Proportion of female executive -1.100** -0.628 -0.170 -0.057
(0.444) (0.695) (0.190) (0.171)
Number of deals last year (for H1)/ 0.215*** 0.213*** 0.031* 0.030*
Deal size last year (for H2) (0.011) (0.029) (0.017) (0.018)
Firm size 0.231*** 0.237*** -0.052*** -0.050***
(0.018) (0.041) (0.014) (0.015)
Tobin's Q 0.038* 0.038 0.067** 0.067**
(0.020) (0.030) (0.028) (0.027)
Free cash flow 0.969*** 1.015** -1.063** -1.046**
(0.343) (0.507) (0.484) (0.482)
ROA -0.045 -0.062 -0.029 -0.029
(0.173) (0.308) (0.023) (0.023)
Leverage ratio 0.223 0.225 0.176** 0.177**
(0.136) (0.164) (0.081) (0.080)
Inverse Mills ratio -0.243*** -0.276** 0.092** 0.085**
(0.077) (0.114) (0.041) (0.041)
Tender offer
-0.240*** -0.241***
(0.060) (0.061)
Target termination fee
0.230*** 0.231***
(0.071) (0.071)
Poison pill
0.031 0.031
(0.028) (0.027)
Competing bidder
0.298* 0.300**
(0.152) (0.152)
Private target
-0.051 -0.050
(0.066) (0.062)
Public target
0.212*** 0.212***
(0.061) (0.058)
Female board representation
-0.897*** -0.223**
(0.313) (0.104)
Observations 13,248 13,248 2,825 2,825
R-squared 0.13 0.14 0.14 0.15
Industry fixed effect Yes Yes Yes Yes
Year fixed effect Yes Yes Yes Yes
Note: *p < .1, **p < .05, ***p<.01; Robust standard errors in parentheses; Industry and year fixed effects included in all models
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